The Federal Reserve recently released its "stress test" results for the nation's top 18 banks. These institutions must get the Fed's blessing for their dividend and stock-repurchase plans. Unfortunately, the exercise has two fundamental flaws: It has allowed our central bank to engage in a piece of political thuggery and set up a process for future financial crises.

Fourteen of the top banks received passing grades on capital adequacy. But two others were told to deal with alleged weaknesses by later this year, with another two given flunking grades. One of those four firms is Ally Financial, which no one disputes still has a lot of recovery work to do, but the other three--
JPMorgan Chase, Goldman Sachs and
BB&T--were whacked for political reasons.

JPMorgan--headlines and congressional hearings to the contrary--is a well-run institution with a good balance sheet. Its real sin is in its boss, Jamie Dimon, who made clear his deep disenchantment with the Obama Administration. The same is true of Goldman Sachs: Mitt Romney had very close ties to Goldman, and CEO Lloyd Blankfein also didn't do a good job of hiding the fact that he was less than enchanted with Obama.

The Fed's thrashing of BB&T, however, is especially disturbing, because it is the best-capitalized institution of the 18. The Fed is playing dirty pool here for two reasons. First, the bank's former CEO John Allison IV, who made BB&T the formidable powerhouse it is today, was unusually outspoken in his criticism of bank regulators. During the financial crisis of 2008-09 he fiercely resisted Treasury Department pressure to take TARP money. The bank took it only after Treasury Secretary Hank Paulson threatened grievous harm. Second, the Fed didn't like the firm's less-than-adulatory views regarding economic and financial modeling. Sure, BB&T had its own internal models for assessing risk, based on its own experience. But while the Fed won't admit this, it wants all financial institutions to basically follow its own model.

And this is where we'll get into future trouble. The Fed is forcing institutions to be, in effect, carbon copies of one another in their activities. Thus, if there is another financial "virus," all of these institutions will be infected and topple.

A theoretical possibility? We have real-life proof of the folly in this kind of forced uniformity: the Basel Accords. For years regulators around the world have been concocting uniform risk assessments to judge bank loans. The results of this exercise have been disastrous. Banks had to hold no reserves against government debt yet hold hefty set-asides for business loans. Greek government bonds were seen as infinitely safer than a loan to, say,
IBM. Mortgage-backed securities also got preferred regulatory treatment--and we all know where that led.

That the White House is engaging in Chicago-style retributions is no surprise. But for the Federal Reserve to engage in this kind of Godfather-style activity is appalling.